EigenLayer, one of the biggest staking protocols on the Ethereum network, is facing a significant challenge that could potentially lead to a yield crisis.
Industry observers are increasingly concerned about the growing difference between EigenLayer’s Total Value Locked (TVL) and its Actively Validated Services (AVS).
What Has Been Said About The Yield Crisis
Chudnov, a pseudonymous employee of the derivatives exchange 3Jane, recently posted that EigenLayer’s Total Value Locked (TVL) exceeds $15 billion.
However, Chudnov suggests that to maintain security, the Actively Validated Services (AVSs) require only a bit of that amount, possibly less than 10%. As such, it’s clear to see that EigenLayer users might experience reduced yield in the future.
The Liquidity Problem
Liquid staking is a method that enables users to stake their assets on a blockchain while still being able to access them in the form of liquid tokens.
EigenLayer is popular among its users for Ethereum staking. It allows users to earn rewards without locking up their assets.
However, there’s a big problem at hand. There’s a difference between what’s staked on EigenLayer (Total Value Locked or TVL) and what’s really needed for validation (Actively Validated Services or AVS).
Even if more is staked, it doesn’t mean more work is needed for validation. So, as more people stake, the rewards might get split among more users. Over time, users would earn less.
What’s Next for EigenLayer?
EigenLayer may need to explore various solutions to avoid a potential yield crisis. One goal is to enhance the utility of its liquid staking tokens within the DeFi ecosystem.
One possible approach could involve innovating new functionalities for these tokens, expanding their use beyond traditional staking activities. By enabling users to use DeFi apps more while still earning staking rewards, EigenLayer could effectively bolster the attractiveness and versatility of its platform.
Still, EigenLayer’s future is uncertain. It has to create a model to address its growing Total Value Locked (TVL) to remain a viable option for Ethereum stakers in the long run.
Thus, EigenLayer’s upcoming developments and strategic adjustments will be crucial in shaping its sustainability and continued relevance within the Ethereum ecosystem.
Earn more PRC tokens by sharing this post. Copy and paste the URL below and share to friends, when they click and visit Parrot Coin website you earn: https://parrotcoin.net0
PRC Comment Policy
Your comments MUST BE constructive with vivid and clear suggestion relating to the post.
Your comments MUST NOT be less than 5 words.
Do NOT in any way copy/duplicate or transmit another members comment and paste to earn. Members who indulge themselves copying and duplicating comments, their earnings would be wiped out totally as a warning and Account deactivated if the user continue the act.
Parrot Coin does not pay for exclamatory comments Such as hahaha, nice one, wow, congrats, lmao, lol, etc are strictly forbidden and disallowed. Kindly adhere to this rule.
Constructive REPLY to comments is allowed